Market volatility continued during May. While the downtrend continued for most of the month, a strong recovery at the close saw the major indices end the period virtually unchanged. Defensive strategies such as value companies continue to be favored over growth companies, such as the technology sector (Nasdaq) which ended with a -2.05% return for the month.

The low point of the period occurred when Target and Walmart's reports were released, announcing cost increases due to inflation, and consequently, difficulties in maintaining margins and profits for the rest of the year.

On the other hand, the end of the month recovery was triggered by the release of the minutes of the Federal Reserve's May 5 meeting. At that meeting, it was decided to increase the benchmark rate by 50 basis points; however, the minutes presented a more lax tone by considering additional hikes of 50bp for the June and July meetings, and not 75bp as some analysts had expected. This resulted in lower pressures for fixed income, which also had a slight recovery during the month. For example, investment grade corporate bonds and high yield bonds rose 0.93% and 0.25% respectively.

The winner for the month was the energy sector of the S&P 500, which rose 16% in the period driven by further increases in oil and natural gas prices. The Mexican peso appreciated 3.33% against the dollar to close at $19.66, outperforming against a basket of major currencies that appreciated only 1.48% against the dollar.

On macroeconomic issues, 390,000 new jobs were created in the U.S. during May, increasing the labor force participation rate and keeping the unemployment rate at 3.6%. While inflation continues to be the most relevant variable, the strength of the labor market considerably decreases the probability of entering a recession this year, contributing to the Fed's goal of a "soft landing": controlling inflation and maintaining economic growth.

Grupo Inversión keeps looking for opportunities, considering that the entry multiples for the American markets are attractive for a long-term investor. Recently we have evaluated acquiring positions in even more attractive markets based on multiples such as China and Europe.